1 The chief movements in the account of the Bank of France, caused by the war, can be seen in the following table, given in millions and tenths:

June 23d was the day when the cash was at its maximum for 1870; August nth was the day before the suspension; no account was published between September 8, 1870, and June 29, 1871.

1 Under the operation of this law the Bank of France held suspended paper to the amount of nearly 870,000,000 francs. Of this more than two thirds was paid in before the expiration of the legal term of indulgence; and of principal and interest less than one per cent. was still unpaid at the end of 1874. Courtois,. Histoire, p. 263.

The state had at the outbreak of the war obtained a small advance from the Bank, and called for others soon after the suspension. During the siege of Paris the branch of the Bank at Tours became the agency by which considerable advances were made to the provisional government at Tours, while the Bank itself was in like manner aiding the government in Paris. When the war with the Commune succeeded that with Germany, these advances had risen in all to 761,000,000 francs, besides a loan of 210,000,000 francs to the city of Paris. The Bank resisted with great difficulty the efforts of the Commune to use its resources in defense of the city, and for several weeks escape from open pillage, or from demands not to be distinguished from it, seemed hopeless. The prudence of the managers, the devotion of their subordinates, and the steady support of one or two members of the revolutionary body itself, carried the Bank safely through the most dangerous episode of its history, and enabled it, upon the suppression of the Commune, once more to give its aid freely to the government.1 In July, 1871, the loans thus made to the state amounted in all to 1,425,000,000 francs, and the government now happily found itself in such a position that it could cease drawing from this source.2

1 For minute details of the history of the Bank under the Commune, and of the means by which it was saved, see Du Camp, Lea Convulsions de Paris, iii., ch. ii.

2 In the Bulletin de Statistique el de Legislation Comparee for thousand millions of francs, to which it was bound by the treaty of peace; it had yet to learn how far its credit would enable it to make this payment by borrowing in the general market, and the most that could be hoped was that it should not have to call upon the Bank for further aid. The latter could not expect, therefore, for several years to come, to extricate the resources which it had lent to the state.

The brief statement given on p. 180 shows distinctly enough the change which a year of war had wrought in the affairs of the Bank. An enormous loan had been made to the state simultaneously with an increase of discounts for individuals, and this had been effected partly by the sacrifice of cash and partly by an increase of notes, the volume of which now stood nearly 800,000,000 francs above the highest point ever before reached. This increase of notes had been managed with great caution, so that while it necessarily expelled from circulation a considerable amount of specie, it had nevertheless brought about but a slight depreciation of the paper1; and with the repayment by the government of the advances made to it by the Bank, the restoration of specie payment promised to be easy. The government, however, was for the time in no condition to undertake the payment of a domestic debt. It had before it the problem of paying to Germany, in the next two or three years, the great indemnity of five

April and May, 1880, is a careful report upon these loans and upon their subsequent payment.

1 During the war quotations were made of exchange on London and occasionally of gold, indicating in one extraordinary case a premium of four per cent. on specie. After the restoration of order gold ceased to be quoted, and the price of exchange on London fell to a level of about 1 per cent. premium. See the Economist for quotations both in London and in Paris. Léon Say's Rapport sur le Payement de I'Indcmnité de la Guerr gives a chart showing the rates of exchange in Paris on London from June, 1871, to September, 1873.

But while the Bank thus saw its resources unavailable for a movement towards specie payments, it was also called upon to increase at once the assistance given by it to commerce. It was of paramount necessity that productive industry should resume its activity without delay, for it was after all in the production of wealth and its proper use that France must find the means of escape from the economic misery caused by the war, and it was the thrift and prosperity of individuals that must support the credit, on which the country now relied in making its settlement with Germany. Special precaution was needed to insure industry from being starved of its needed supplies of capital, while the government was borrowing the vast sum to be paid to Germany. The Bank therefore took the bold course of rapidly enlarging its discounts and advances to individuals; and to make this possible, in a country where deposit accounts and checks are but little used, it was authorized in December, 1871, to increase its issue of notes to not more than 2,800,000,000 francs, and in July, 1872, the limit was further extended to 3,200,000,000. Such an increase of paper with a forced circulation required, as the condition of possible safety from serious depreciation, a further expulsion of specie from use. The smallest notes thus far issued by the Bank were notes for 20 francs authorized by a law of December, 1870; but the law of December, 1871, raising the limit of the total issue of notes, now authorized the issue of notes as low as 5 francs, and thus facilitated the introduction of the bank paper into all the channels of circulation, small as well as great.

With the ground thus prepared, the great scheme for the simultaneous payment of Germany and revival of France was carried through. The government borrowed in all the markets of Europe, including that of Germany, but called upon the Bank of France for nothing more than two or three temporary advances, not large in amount and soon repaid. The Bank doubled its discounts of commercial paper for the next three years, and for this purpose increased the note circulation until at its maximum at the end of October, 1873, it nearly reached 3,072,000,000 francs. From the data subsequently published it appears that the whole of the increase was made by the issue of notes of not above 100 francs, and the greater part of it by means of notes of 50 francs and less. The risks of the operation were amply compensated by its gains. Although the government, in view of the valuable privilege enjoyed by the Bank of making a great issue of notes without the obligation of payment, reduced to one per cent. the interest on its own debt to the Bank, the profits from the immense increase of discounts were heavy. Dividends of 20 per cent. for the second half of 1871, 32 per cent. for 1872, and 35 per cent. for 1873, amply justified the conduct of the management in the eyes of stockholders, and once more proved that in periods of specie suspension no trade flourishes like that of the dealers in credit.